The big swindle

Brokers are being warned they need to be increasingly vigilant after research showing mort-gage fraud has doubled in the past five years.

Credit analyst Experian published statistics last month revealing mortgage fraud attempts increased by 14 per cent to 32 in every 10,000 applications in 2010 compared with the previous year.

The figure has steadily increased since 2006, when there were 15 attempted frauds per 10,000 submitted applications. The figures were not broken down to show how many of these frauds went through an intermediary to place the application.

The report used information collated through the National Hunter and Insurance Hunter fraud data-sharing schemes. It showed a sig-nificant rise in application fraud, much of which was attempted by young professionals, with 97 per cent down to a customer inflating their income or trying to conceal details of adverse credit history.

It also says former self-certification borrowers who, faced with a choice of no loan, a less competitive rate or more affordable mortgage by misrepresenting their job status, choose the latter.

Experian director of identity and fraud Nick Mothershaw says: “Fraud in the UK is a multibillion-pound business with fraudsters targeting any weaknesses in the system. Fuelled by the recession, financial services providers could see fraud rise this year.

“To manage the financial and reputational risk fraud presents, organisations must ensure they have the right defences in place that allow rigorous validation of identities and information while still being able to provide the experience genuine customers expect.”

Your Mortgage Decision director Dominik Lipnicki says: “Fraud is only going to go one way as interest rates go up and people get more desperate.”

But Telos Solutions director Richard Farr believes the increased emphasis on fraud detection is the main reason behind the rise.

He says: “In the good times there was a laissez-faire attitude. As long as the mortgage was being paid, lenders tended not to care. Things are tighter now. More resources are being put into invest-igating fraud, so more is being reported.”

Chadney Bulgin mortgage partner Jonathan Clark believes brokers have a vital role to play in countering mortgage fraud in applications. He says: “If a broker is presenting a case to a lender, it is their responsibility to bring the issue up with the lender. Brokers are generally the ones meeting customers, so it is very important.”

PMS executive chairman John Malone, who is the Association of Mortgage Intermediaries’ representative on the National Fraud Authority’s mortgage fraud forum, says brokers need to carry out more due diligence on clients. He says: “You have to know much more about your client than in the past. You cannot just assume the person ringing you up is who they say they are.”

Capital Fortune managing director Rob Killeen says: “There has to be a sea-change in thinking about fraud and branch staff and intermediaries must play their part.

“Applications need to be checked rigorously and the pressures of performance targets for branch staff and the maintenance of sus-tainable income streams for brokers mitigated as part of an holistic fraud prevention strategy.

“Clients prepared to inflate income must be aware it is a criminal offence. Perhaps fraud would be reduced if there was a regulatory requirement for all advisers to remind clients of this fact prior to seeking disclosure of income details.”

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